Singapore office market recovery well underway: Colliers
The section is expected to continue growing in the coming months, supported by a broad-based economic recovery and also return-to-office momentum. Colliers anticipates rents for CBD premium as well as Grade-A workplaces to grow by 4% to 5% in 2022.
Premium as well as Grade-An office complex in the CBD additionally remained to see solid leasing demand, with positive net absorption of around 134,000 sq ft in 1Q2022. Meanwhile, the job rate tightened up to 3.3%.
The healthy and balanced leasing demand for the CBD premium and Grade-An office section is backed by corporates’ preference for newer office buildings with high-grade specifications, to prepare for employees going back to the office and also the expected pick-up in organization task.
At the same time, on the investment front, typical resources worths in the segment boosted 5.6% q-o-q in 1Q2022, hitting $2,850 psf. Alike, net returns compressed by 0.1% q-o-q to 3.4%, with cap prices coming in between 3% as well as 3.6% in the last quarter.
Colliers recommends tenants take early action on future workplace decisions, as the market shifts in favour of property managers. Landlords of office possessions with obsolete specifications need to take into consideration repurposing or redeveloping their assets, to future-proof them.
On the back of limited yields and rates of interest uncertainties, investors are suggested to focus on energetic asset maintenance or enhancement to attain return targets.
In regards to the CBD micro-markets tracked by Colliers, office buildings in the Raffles Place/New Downtown area, in addition to the Shenton Way/Tanjong Pagar area, saw the highest development in rentals, enhancing 2.3% q-o-q to reach $11.96 psf.
A workplace study by Colliers for 1Q2022 suggests that the recovery momentum in the Singapore workplace market is well underway. Premium as well as Grade-An office rentals in the CBD increased for a 3rd successive quarter in 1Q2022, enhancing 1.5% q-o-q to reach $10.26 psf, sustained by healthy and balanced renting need. This marks the fastest rate of development considering that rentals rebounded in 3Q2021.
Leasing purchases throughout 1Q2022 included fashion merchant Shein taking up 21,000 sq ft at Marina Bay Financial Centre Tower 3. German chemical company BASF will be relocating from its existing premises at Suntec Tower 1 to the upcoming Guoco Midtown.
Progressing, Colliers expects office assets in prime areas to proceed drawing in a large range of capital, underpinned by a healthy leasing market overview, minimal new supply, and the reopening of Singapore’s borders.